The major indexes gave up all of their gains for the week on Friday as instability in Egypt mounted and the price of oil futures rose. Well over a million barrels of oil move daily through the Suez canal so the potential is very real for any disruption to further damage western economies. The likelihood of a closing of the canal has to be considered remote but as long as the situation is unstable market volatility will remain high.

These geopolitical concerns coincided with a disappointing GDP report which fell below expectations, a large drop in profits at Ford Motor, falling Windows sales at Microsoft and a warning from Amazon that earnings may miss analyst's projections.

Confidence had been building throughout the week after last week's mild correction. Our equivolume chart, which succinctly combines price and volume, dramatically illustrates how fear overwhelmed mounting optimism. That optimism may return once the situation is resolved but that could take a while. Demonstrations in Egypt after the apparent successes in Tunisia remind me of 1848 when revolutions swept across Europe. We could see a spreading backlash against repressive arab regimes that will roil markets for some time.

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Although our market trend signals still point up, I think its wise to sit things out until the smoke clears.